Review: Please Send Money

Each Friday, The Simple Dollar reviews a personal finance book of interest.

As I watch my nieces and nephews grow up and approach college age, I constantly see potential in them. Potential to live a great life where they’re in control of their own destiny. Potential to follow their dreams, no matter what those dreams might be.

A big part of that is having a good understanding of personal finances right off the bat, and that’s basically the idea behind Please Send Money. Written by Dara Duguay, the director of Citi’s Office of Financial Education, it focuses on the financial reality of young adults just starting out, particularly those who are currently in college.

1. The Ostrich Syndrome
Right off the bat, Duguay hits upon what I consider to be the biggest danger that many people face when financial problems begin to strike: they stick their head in the sand. I did the same thing: I spent money like it was going out of style and pretty much ignored the consequences. The truth is you can’t do that – if you do, you’ll end up paying for it throughout your adult life. Duguay gets the point across by using many stories from people who ignored things – and the pain of those stories rang very true for me. Her advice? Pay attention. If you’re getting worried about your money, don’t just ignore it. Address it head on and find a solution now, not in five years when it’s disastrous.

2. Do You Run Out of Money Before You Run Out of Mouth?
Here, Duguay makes a very compelling case for spending less and addresses head-on most of the arguments that people throw up against living on the cheap. Why shouldn’t I spend everything I make? Because it puts you at the mercy of your boss and removes control from your life. Why should I even think about spending less than I do? Because if you’re spending more than you earn right now, a big bill will come home to roost, and the only way to keep yourself away from a financial disaster later on in life is to spend less now. But won’t I feel miserable if I downgrade my lifestyle? Maybe, but you’ll be a lot more miserable if your income drops or your bills come due – it’s much easier to downgrade a bit right now than to face complete disaster in a year or two.

3. Credit: It’s Not Your Money
When many people first become comfortable with using a credit card, they lose that connection between the credit card and the reality of money. If you can just give them the card and get the stuff, why not just keep doing it? When that disconnect happens, you’re on very dangerous ground. What’s the solution? Keep very careful tabs on your cards: know what the balance is, how much you actually can afford to charge, and also know how you’re going to be repaying anything you charge. If you don’t know, you shouldn’t be using the plastic.

4. I Need Wheels
Duguay mostly lays out useful basic information for buying a car. She focuses quite a bit on what I consider to be the most important piece in the car purchasing puzzle: the extra costs. Gas, oil changes, other maintenance, insurance, repair costs: they all add up, and many people don’t even consider it when they make a purchase. Even more compelling (for me) is the section in which Duguay really digs into the idea that many people buy cars based on image, not necessarily on reliability or value. In other words, they’ll pay a stunning premium just to appear “cool.” My neighbor down the road a bit has a Lexus and, frankly, I’m a bit jealous of it when I see it out in the driveway, but when I step back and think about his $500 car payments, I suddenly feel quite a bit better about my decision not to have one.

5. The Semester of Living Dangerously
The college experience is often filled with risky behavior, and financially risky behavior is no different. Not only is there a big credit card risk (as covered in the third chapter), but there’s also student loans, party expenses, and a huge variety of ways in which to gamble your money (day trading and card playing were two that I saw frequently in the dorms). Most risky behavior in college has no ill effects once you’ve moved on, but financially risky behavior often has huge consequences that dog you for years. If you feel like pushing the limits in college, that’s fine, but when you push the limits with your money (like one person I knew who took out a huge student loan and used the excess to day trade), you’re setting up a scenario where you’ll be literally paying for these moves for many years to come. So, go out and have fun, but don’t do stupid things with thousands of dollars unless you want huge debt bills to repay later on in life.

6. What Do You Want to Be When You Grow Up?
Determining what you want to do with your life is a challenge that almost everyone faces at some point in their life, and some people never really figure it out. Duguay offers some very strong encouragement (both financial and otherwise) for figuring this out as early as possible, and also offers some very basic tactics for figuring this out. Her ideas are enough to generally point a person in the right direction with their educational and career choices, but it’s not quite enough to push a person to the right answer. My suggestion? Read Richard Nelson Bolles’ excellent What Color Is Your Parachute? It’s the single best guide I’ve ever read on figuring out what you want to do with your life.

7. Returning to the Nest
Here, Duguay focuses on the challenges of a person who moves back in with their parents. For this chapter alone, Please Send Money is a book worth reading for kids who have returned to the nest. The basic idea? Create a plan. Plan right now for a move-out date, because without a target and a plan for working for that target, that move-out will keep slowly being pushed back. How can you plan for it? The best method is to come up with a very clear budget for what it will cost – and the parents should start charging rent. My own thought is that if parents are uncomfortable with taking that money, then still charge rent and put that paid rent into an account to give them back once they’re on their own two feet (for a car down payment or something). Excellent advice here.

8. Loaning Money? Call It a Gift
Duguay offers some general advice on loans here. First, if you’re lending money to anyone, Duguay recommends making it a gift or not lending at all, a stance I strongly agree with. Second, if you’re borrowing money, try to avoid borrowing it from friends or family, as you’ll often alter the relationship in a bad way just by asking. When you do borrow money, make sure you truly understand the entire agreement, because there can often be nasty consequences for not knowing the rules and thus not following them. Borrowing money is never a fun thing, no matter what.

9. Mind Over Money
Much of personal finance is rooted in psychology. Learning how our minds trick us into making poor buying decisions, understanding the influence marketing has on us, and knowing the techniques used by marketers to gain access to our wallets are all useful things to know, and they’re all rooted deeply in psychology. Duguay’s advice is to think deeply before you spend, no matter what you’re spending your money on. If you don’t really understand why you’re spending the money, don’t spend it! If you do know but the reason seems flimsy, don’t spend!

10. ‘Til Debt Do Us Part
Relationships aren’t easy, and finances make them even more difficult. Duguay offers the basics of what you need to know, but there really is only one key to making money and relationships mix well together: communication. Talk about everything you’re uncertain about. Every bill should be entirely open with your partner. You should be fully honest about what you’re thinking – and about what you’re spending. If you don’t do these things, you add mistrust to your relationship, and that mistrust can fester and eventually grow into something that can destroy the relationship. Excellent advice, in my opinion. If you’re really into the topic of relationship-based personal finance advice, The Big Payoff by Sharon Epperson is an excellent read.

11. “I’m Too Young to Start Saving” and Other Excuses
Duguay spends most of this chapter countering arguments people may want to make against financial responsibility, including that old chestnut in the chapter title. In a nutshell, if you’re old enough to start facing paying any kind of bill, you’re old enough to be financially responsible and start saving. I particularly like that she took on the tired old argument that “saving a little bit here and a little bit there is a waste of my time,” something I hear almost every time I write about frugality. If you can shave off $3 a day, that’s $1,100 a year – three or four car payments for most people. The little things add up – and they add up quick.

12. Easy Come, Easy Go
Duguay seems to address a lot of little things in this chapter, like keeping your spending down, hiring a financial advisor, and determining what your priorities are, but the real message boils down to just one word: goals. Set goals for yourself, ones that you can reach if you stretch yourself, and keep setting new ones as you reach old ones. You always need a carrot to strive for – without them, you’ll keep spending for the now and never have a great tomorrow to look forward to.

13. Wall Street Panic
This chapter covers the basics of investing, and for the most part it’s completely in line with my investing philosophy: buy diverse holdings and sit on them. For me, that means buying index funds. More importantly, Duguay encourages not “gambling” with the stock market – don’t buy the “hot” stock of the moment, because you’ll very likely just get burned by it. I generally agree with her: turn off CNBC if you’re tempted to put your cash into one of their talking heads’ hot pick of the moment.

14. Bankruptcy – Is There an Easy Way Out?
Dubuay closes by giving some serious consideration to the question of bankruptcy, something that many people bring up to me in questions. For the most part, she encourages people not to just hit the bankruptcy button as a way out, because it creates ten years of very difficult experiences as you find out what life with no credit at all is like. Think very high insurance rates, poor loan opportunities, and so on.

After reading the book, I was left with several thoughts floating around in my head that were worth discussing. Here are a few.

The cost of “image” A big undertone of this book is the constant reveal of how much spending a person makes in order to maintain image. Clothing. Automobiles. Housing. Gadgets and electronics. Image is a big part of all of these purchases, and these purchases really add up. The thing that always bites me is that most of this “image” is the result of marketing, but even if you realize it, that doesn’t mean that others do. Thus, it becomes a difficult challenge for image-conscious people: how do you display the kind of personal image you want without spending too much? Image is a ridiculously costly thing – so costly, I’ve ceased to really care that much about it.

I think loaning money to a family member or a friend is a very bad idea. If you have someone close to you who has asked you for a loan, don’t do it. If you feel truly compelled to help, make it a gift, not a loan. If you loan money, you create a lender-borrower relationship – and can you name anyone who has warm and fuzzy feelings towards their banker? Imagine what might happen if that person doesn’t repay the money. I think this is a fine general philosophy to live by.

Why do we all make financial mistakes when we’re young? From the age of about eighteen to about twenty six, I made a ton of financial mistakes. There are times when I wish I could go back, grab myself by the ears, shake myself wildly, and say “Stop being STUPID!” But is that a necessary thing? I really believe that in the end, even though recovery was painful, it was the best thing that could happen to me.

This is the single best personal finance book I’ve read for people under 25. If you’re in that category, whether you’re 16 and just thinking about college or 24 and just getting started on a career, there’s a ton of meat in this book for you to think about.

Duguay hits a perfect balance between stories of how real college-age people are dealing with these issues and the concrete advice that’s needed. She also doesn’t speak down, either, something that many books targeting college-age people fall into. I often get the impression that she’s talking to her younger self, trying to sit down with her at a coffee shop and telling her the things she dearly wishes she knew back then, but doing it in a way so that her younger self might actually listen instead of tuning her out.

I thoroughly enjoyed Please Send Money and highly recommend it to others. If it seems applicable to you at all, go to the library immediately and check this one out. This book has now become my default high school graduation gift for friends and children of friends – it’s really that good. Bravo, Dara Duguay.

Is this book really only focusing on those young adults in or about to enter college, or would it also be good for those who have decided not to attend college as well?

I am very interested in purchasing this book for my younger brother who has decided to forego college. I would hate to get him this book only for him to feel it’s irrelevent to him because it is only focusing on examples relating to college experiences.

Wish I had read this review a couple weeks ago! My wife’s cousin just graduated high school and is shipping off to the Navy. We will include a copy of this one as part of his first “care package” we plan to send when he gets settled.

I can totally relate to The Ostrich Syndrome. I would go weeks, sometimes even months, without balancing my checkbook or even peeking into my savings account (probably because I was afraid to see how little was still there!). Much can be said for simply paying attention as the first step in the road to financial recovery.

HA!
I love the point that you made about the neighbor with the Lexus.
My wife and I thought it was important to live a in a great neighborhood in our city and just after we purchased our home, developers began to build new city lots directly across the street from us.
This is great because all of the new $500,000+ houses are certainly bringing up the value of my house, but it’s hard to watch all of them pull up to their brand new house in their Lexus, BMW’s and Mercedes.
While I don’t truly know their situations, I could imagine that at least a few of them are living well beyond their means.
P.S – I’ve told this story before, but driving my old 1991 Honda Civic while in University (and for 2 years after) was probably one of the best financial decisions I made – relative to my peers.

Image: You can not ignore this aspect. It is possible to create a acceptable, even admired image while practicing fugality. Even with the rampant marketing going on throughout our society several of the idea’s passed along in the marketing can be applied frugally. In particular I find applying attention to detail to be an excellent method of creating an image others will want to follow. And along the lines of the $3,000 purses. I have an artisan handbag from Italy which is way cooler and only cost $30. (Etsy!) Plus it dosen’t look the same as yours.

Also, when you’re talking about college students, image is a huge issue. It’s not just about the media’s perception, but that of other students…all of whom are trying desperately to create an image that “fits them” but that also lets them “fit in”…and that can be costly sometimes…

Honestly, even if someone had given me this book when I started college, I’d have pretty much ignored it. I’m not one of those voracious readers that reads everything in print. If I’m not interested in the topic, I won’t even pick it up. (Part of my battle to declutter my mind and fight the constant build up in there.) The reason I wouldn’t have picked it up is that I worked hard for my parents ever since I was a kid and they promised me that they would always take care of me. In fact, I didn’t even have a credit card in my own name till I was almost out of college and finally suddenly they disowned me. I had to apply for emergency financial aid to finish college and, of course, credit cards in my own name.

Since I had already developed a habit of impulse buying while using my parents’ credit cards, I merely continued with my new credit cards (which were funded by my new student loans). College turned into law school and more student loans. I never felt I was in danger b/c all my friends seemed to be doing the same thing and not at all worried about it. I assumed that becoming a lawyer would result in enough income to pay it all off eventually. Wrong!

If I wanted a young adult to read this book, I’d offer him/her $100 cash to read it and explain to me what the books is about, chapter by chapter, and then tell me what, if anything, they learned from it, and finally if they intend to do anything differently as a result of it. That just might work. It would have worked for me!

The idea came to me b/c I remembered a story about Andrew Carnegie. Apparently he had a sister who was worried to death b/c her two sons who were away at college would never write her back, despite her many desperate pleas in her many letters asking for them to. When she mentioned this to Carnegie, he asked if anyone would wager with him that he could make those boys write him without even asking them to. Someone took that bet and he wrote a letter to each of the boys that never mentioned the problem their mother was having with their not writing back and wishing them the best of luck in their college life. He ended each letter by saying he hoped they would enjoy the cash he included with the letters. But, he didn’t include any cash. Each boy immediately wrote back to thank their “Dear Old Uncle” for his lovely letter and, by the way, he should know that there was no cash enclosed with the letter.

This book looks like a great gift for all the college students in my life! Thanks for the pointer.

A quick note on the recommendation to read “What Color Is Your Parachute?”, which I know you’ve recommended here before. That book was not what I expected at all. It was so heavy on Jesus and God references that I really couldn’t get through it. I have no idea why such references should have a place in a career book that is supposedly geared toward everyone. Did anyone else have this experience with that book?

I actually do have warm and fuzzy feelings about my banker, but he is a goofball.

Another think kids need to realize about bankruptcy is that it is a long process. There seems to be a perception that you just file something in court, maybe lose a few assets, and it’s done except for the poor credit rating. Not so — you will spend months to years paying excess income to your creditors until your bankruptcy is discharged. I didn’t know this myself until I looked it up when my brother asked me about it because he had a friend who had bought a really expensive car and was tired of the car payments and wanted to declare bankruptcy to get rid of them. When you hear about the words “declare bankruptcy” it seems like it is a one shot, painful but brief action.

I sometimes feel like I’m the only twenty-something who actually knows about money, debt, and investing. The even scarier thing is, I don’t even know that much. Please tell me I’m not alone in this…

And for what it’s worth: I did borrow money from my mom and dad to get my laptop, which I needed. I paid them back, all but the last $300, which they decided to count as a present for Christmas and my birthday (they’re pretty close). And I did have to borrow money from my counterpart, to get the first month’s train ticket so I could go to work–and I paid him back as soon as I got paid. I guess what I’m trying to say is that loans don’t have to get ugly. In both cases, they were for things that I really needed and couldn’t afford otherwise (I have issues, to say the least, about putting those kinds of purchases on plastic–if I can’t afford the thing to begin with, what makes me think I can afford the thing plus interest?).

@tbrock: I find just the opposite. To other people, being a student is a great excuse for living in a small apartment, being cheap, and having shabby belongings. And I’m a grad student who is paid what is actually pretty nice stipend and who does not have to pay tuition. Sometimes when I’m with people who have real jobs, I will attempt to pay them back for something they’ve purchased for me, and they will refuse my money, saying, “Oh, no, you’re just a student.” :( Even when I was in college, I didn’t feel pressured to spend money to fit in. On the contrary, in the dorms there seemed to be many people who decided that leaving home meant that they didn’t have to wear clean clothes, tidy their rooms, wear shoes, cut their hair, or (sometimes) shower regularly anymore. There was actually significant pressure to dress down. Then again I went to an engineering school; in a typical university, the situation is probably very different.

“I sometimes feel like I’m the only twenty-something who actually knows about money, debt, and investing. The even scarier thing is, I don’t even know that much. Please tell me I’m not alone in this…”

I’ll tell you, then: You’re not alone. :) Though I’m not quite a twenty-something yet, I’ve got two days to go yet before I hit twenty! I do think we’re the minority, though.

Personally, I don’t get jealous of any Lexus I see. Sure, they can be nice and shiny, but then I remind myself that the rest of the world doesn’t consider “Lexus” to be high end. Why? Because the rest of the world doesn’t have Lexus. (Though I think there’s one other country that does, can’t remember which. No other country has Acura or Infinity though. Not that we’re better, we’re just more gullible.)

After all: Lexus = Toyota, Infinity = Nissan and Acura = Honda. Next time you find yourself getting a bit green, just imagine telling the person who owns it, “Hey, nice Honda/Toyota/Nissan,” and seeing the look of confusion you’ll get from most people. (That’s what I do, anyways, and it works pretty well for me.) That and knowing what the cars are actually worth as far as Mercedes and BMW go. Most that you see are either leased or not as much as you’d think they are. (I’m certainly not jealous of either lease payments OR car payments, I have neither!)

I bought this book on this recommendation and have found it to be really good. Although slightly Americanised (I’m English) it’s well worth the read for anyone, anywhere who’s just staring to become financially independent. I’ll be off to university in a year, and having read this I feel in a much better situation to make financial decisions and will make sure I look after my money properly!

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